Financial Management

Mar 20th, 2015

Sigchi4life

Category:

Management

Price: $10 USD

Question description

The company will use new bonds for any capital project,
according to the capital structure. These bonds will have a market and par
value of $1000, with a coupon rate of 6% and a floatation cost of 7%. The bonds
will mature in 20 years and no other debt will be used for any new investments.
What is the cost of new debt? What are the advantages and disadvantages of
issuing new debt in the capital structure?